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The share of household expenditure on transport has been broadly stable over time (when aggregated across countries and income bands). Data suggest that increased fuel prices have given rise to increased expenditure on operational costs, and decreased purchases of vehicles in recent years. High income groups and economically developed countries spend more on car purchase and transport than do low income groups and countries.

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Key messages

The share of household expenditure on transport has been broadly stable over time (when aggregated across countries and income bands). Data suggest that increased fuel prices have given rise to increased expenditure on operational costs, and decreased purchases of vehicles in recent years. High income groups and economically developed countries spend more on car purchase and transport than do low income groups and countries.

How much are households spending on transport? What approaches should countries apply to ensure equality but to enable transport demand management of households with different spending patterns and income?

Share of household expenditure on transport services across countries (% of total spending, 2008)

Note:Share of household expenditure on transport services across countries.

Trends in share of household expenditure on transport (percentage of total spending, EEA-32)

Note:The share of household expenditure on transport includes public transport (transport by train, bus, taxi, ferries and aircraft), operation of private vehicles and purchase of vehicles. Total expeniture is defined as total private consumption in the National Account.

The share of household expenditure on transport appears to remain relatively stable across time and countries, although there are some exceptions. Statistics indicate there was a slight increase in spending through the 70’s and 80’s, which was particularly pronounced for Italy and the UK.

Transport related household expenditure was also stable during the last decade. Data capture for 2009 is currently low, and therefore may not be particularly representative. However, a general increase in the percentage of household expenditure on operation of personal transport equipment (and to a lesser extent transport services) can be seen in recent years. Both increases could be partly caused by rising operational costs in many transport modes, mainly driven by increases to fuel prices. 2008 indicates a corresponding decrease to vehicle purchases (see Figure 1). The rise in the share of transport related expenditure may be explained by two elements. Firstly, it takes time for households to adjust to increases in prices, which have been relatively fast. Secondly the elasticity of transport demand to prices may be lower in relation to other spending areas.

The share of spending on transport for many years appeared to be linked to the increase of personal income. For example, despite vehicle prices falling by around 20% between 1996 and 2008 (see TERM020: transport prices), the percentage of household spending on vehicles has only declined by around 15% (Figure 1). One partial explanation for this trend might be a form of ‘rebound effect’: as Europeans become more affluent, and the real price of vehicles decreases, instead of spending less on the same vehicle they choose to negate some of the price decrease by buying a more expensive vehicle. Another significant factor in the relatively low rate of reduction in average spending on purchase of vehicles, compared with reductions in real vehicle prices, is a rise in car ownership amongst Europeans over the last decade.

Variations can be found between social groups, for example retired people spend significantly less on transport, as do the unemployed (Eurostat, 2010). Travel budgets are also much lower for households without a car. Car ownership levels tend to be lower in lower income groups, and may help to explain the observed differences in proportion of budget spent on travel. With the rise in car ownership in recent times, the average share of expenditures spent on car transport would be expected to rise, which may also explain the small rise in expenditure on operation of personal transport.

If the share of income allocated to transport is constant for the different groups in society, increasing the prices (internalisation) should be seen as a useful tool for governments to influence transport volumes. When income increases faster than transport prices (which has been the case in recent years), transport becomes more affordable; with a stable share of the income allocated to transport, transport volumes increase. However, it is also clear that people not only spend a generally stable fraction of their budget on transport, but also a stable share of their time (Bureau of Transportation Statistics, 2001). As a consequence, travel speed also becomes an important determinant of transport demand, along with costs.

The share of household expenditure on transport services across countries (Figure 2) suggests that a number of different factors affect the levels of expenditure. Whilst households in more economically developed countries are expected to spend more on transport, it is also appears that other factors, such as the size of the country, population density and general distribution of population are also relevant, as is the use of public transport.

For example, the proportion of expenditure allocated to transport in the Netherlands is approximately 2% lower than that in comparable economies such as Germany, the UK and France. This is expected to be due to high population densities in cities and extensive use of bicycles creating both less demand for private car ownership and a reasonably low expenditure on public transport. As another example, Slovenia shows a high overall expenditure, driven by operational costs; the lower household incomes mean that expenditure on fuel becomes proportionally higher.

Current trends show that if transport becomes cheaper, the volume of transport increases. This means that if real incomes rise (a socio-economic goal for any government), demand for transport will continue to rise as long as transport costs decline and people continue to spend a fixed proportion of their income on transport. A good example of this trend is the ‘rebound effect’ that is suggested to occur with more efficient cars. People who buy more efficient cars tend to then start driving more on average because it is cheaper to do so, reducing the benefit of better fuel consumption. It follows that in order to curb emissions from transport, whilst continuing to reduce costs, price/affordability and usage need to be decoupled (Sessa C and Enei R, 2009).

Looking at TERM20, the real price of operation of personal transport equipment has increased, and Fig 1 shows that the proportion of personal expenditure has matched this increase. Although some of this is likely to be due to increases in vehicle ownership levels, it also follows that rather than simply reducing the level of transport in response to increasing prices, people have also to an extent instead devoted more of their personal expenditure to operation of personal transport. This in turn suggests that using financial policies alone to try and reduce personal transport volume may not be fully effective. This is particularly true in relatively wealthy income groups, where increasing the cost of travel results in an increased expenditure being used to maintain a similar level of usage. In less wealthy income groups, lower cost alternatives (including lower levels of travel) may be prioritised. In this way, it is possible that financial policies designed to reduce transport volume may be socially inequitable if they are not carefully designed.

Indicator specification and metadata

Indicator definition

The share of household expenditure on transport includes public transport (transport by train, bus, taxi, ferries and aircraft), operation of private vehicles and purchase of vehicles.Total expenditure is defined as total private consumption in the National Account (CP00).Transport (CP07) is defined as a sum of the National Account consumption groups for:

Purchase of vehicles (CP071).Purchases cover purchases by households of new vehicles and purchases by households of second-hand vehicles from other institutional sectors, which are typically garages or car dealers. Sales of second-hand vehicles between households are not covered. Purchases are net of sales by households of second-hand vehicles to other institutional sectors. Member States may take either - a net weight for new cars (gross weight minus the trade-in value of used cars), and a net weight for second-hand cars, or- a gross weight for new cars (not taking into account the trade-in of used cars), and a weight for second-hand cars including any business sector trademargin.Purchases also cover purchases through financial leasing arrangements.Purchases of recreational vehicles such as camper vans, caravans, trailers, aeroplanes and boats are covered by (CP092.1).

Operation of personal transport equipment (incl. use of petrol), (CP072).Purchases of spare parts, accessories or lubricants made by households with the intention of undertaking the maintenance, repair or intervention themselves should be shown under (CP072.1) or (CP072.2). If households pay an enterprise to carry out the maintenance, repair or fitting, the total value of the service, including the costs of the materials used, should be shown under (CP072.3).

Public transport (CP073) is defined in National Account as Purchased transport services.Purchases of transport services are generally classified by mode of transport (passenger transport by railway, by road, sea and inland waterway, combined passenger transport and other purchased transport services). When a ticket covers two or more modes of transport, for example, intra-urban bus and underground or inter-urban train and ferry and the expenditure cannot be apportioned between them, then such purchases should be classified as combined passenger transport. The latter excludes holiday packages (can be found as CP096). Costs of meals, snacks, drinks, refreshments or accommodation services have to be included if covered by the fare and not separately priced. If separately priced, these costs have to be classified in Division 11. School transport services are included, but ambulance services are excluded (CP062.3).

The proportion of household expenditure for private transport is defined as the sum of the private transport groups (CP071 + CP072 + CP073) divided by the total private consumption (CP00). The classification of consumption groups is made according to the COICOP classification: Classification of individual consumption by purpose (Eurostat, 2000 and Eurostat, 2009).

Units

Percentage of household expenditure on transport. All prices are expressed in current prices.

Rationale

Justification for indicator selection

Internalisation of external costs, a European Commission’s objective from the White Paper (European Commission 2001), sets the ground for enabling the full recovery of the external (mostly environmental and social) costs generated by the use of transport. Initially, and depending very much on the mode of transport, this will increase the costs of transport for the user, as the costs of air pollution, climate change and accidents will have to be paid for. In the long term, the effect on transport prices may be less since pricing policies should take into account the magnitude of external effects through adaptation, modal shift and reduced transport demand.

The indicator provides insight how relevant policy objectives are being met, which as:

Introduction of fair and efficient pricing, according to the users pay principle and principles of sustainable development such as achieving a balanced shift towards environment friendly transport modes to bring about a sustainable transport and mobility system (European Council, 2006)

Scientific references

No rationale references
available

Policy context and targets

Context description

There is a generally accepted close link between income and expenditure on transport (Bureau of Transportation Statistics, 2000). In general, people tend to spend a relatively stable share of their income on transport. Seeing this link, increasing transport prices is likely to lead to a decrease in transport demand and consequently reduced pressures on the environment. Conversely, decreases in transport prices are likely to lead to increased demand for transport. Transport pricing may thus not only be a tool to reduce the environmental pressure of transport, but also an important tool for transport demand regulation.

Internalisation of external cost, a Commission objective from the Transport White Paper (European Commission, 2001) aims to ensure users pay for the external cost generated. The Commission recently published a Communication on a strategy for the internalisation of external costs (EC, 2008a). This strategy stresses “the need for a transport pricing system that is more efficient and more accurately reflects the true costs involved”. In order to achieve this, a range of economic instruments are suggested, including taxation, tolls and CO2 emissions trading. The general principle for internalisation of external costs is ‘social marginal cost charging’, whereby transport prices should correspond to the additional short-term cost generated by one extra person using the infrastructure, ensuring fair treatment of both transport users and non-users and would create a direct link between the use if shared resources and payment on the basis of the ‘polluter-pays’ and ‘user’ pays’ principles. This same principle is expected to be used across the various modes of transport, but with varying instruments. Initially, and depending very much on the mode of transport, this will increase the costs of transport for the user, as the costs of air pollution, climate change and accidents will have to be paid for. In the longer term, the effect on transport prices is likely to be less, since pricing policies will reduce the magnitude of external effects through adaptation.

Expenditure on transport offers insight into a driver of transport demand, which may through better transport demand management contribute to a better environment.

Sessa
C and Enei R (2009). EU transport demand:
Trends and drivers, paper produced by ISIS
as part of contract ENV.C.3/SER/2008/0053 between European Commission
Directorate-General Environment and AEA Technology plc; see http://www.eutransportghg2050.eu

Methodology

Methodology for indicator calculation

The sources for the expenditure group's private and public purchase of transport can be found in the National Accounts system.

National accounts are a coherent and consistent set of macroeconomic indicators, which provide an overall picture of the economic situation and are widely used for economic analysis and forecasting, policy design and policy making. Eurostat publishes annual and quarterly national accounts, annual and quarterly sector accounts as well as supply, use and input-output tables, which are each presented with associated metadata.

Annual national accounts are compiled in accordance with the European System of Accounts - ESA 1995 (Council Regulation 2223/96). Annex B of the Regulation consists of a comprehensive list of the variables to be transmitted for Community purposes within specified time limits. This transmission programme has been updated by Regulation (EC) N° 1392/2007 of the European Parliament and of the Council.

Household final consumption expenditure by consumption purposes (COICOP) for Transport (total) (CP07),Purchase of vehicles (CP071),Operation of personal transport equipment (CP072), Transport services (CP073) and Total (CP00) were collected for the EEA-32 (where available, see below), and the totals expressed as a proportion of Total (CP00).

Methodology for gap filling

No gap filling was used in this indicator. However, data was only used for each Member State and year when there was data for each of the four COICOP categories. This means that the Member States included varies from year to year. Member State inclusion in each year for Figure 1 is detailed in the table below. There is no gap filling for Figure 2 – only Member States for whom data for all four CIOCOP categories were available have been included.

The number of EEA-32 member states’ data used in each year of Figure 1 are (from 1990 to 2008): 12, 14, 15, 19, 19, 27, 27, 27, 28, 28, 29, 29, 29, 29, 29, 29, 27, 26, 21. Data were not available in any year for Croatia, Switzerland and Turkey.